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Iran Conflict Brief: The War's Lasting Impact on Gulf States · Columbia Energy Exchange

• 0:00
  Daniel Sternoff:
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  Events in the Middle East are changing quickly and the complexities of understanding the global energy landscape grow deeper by the hour. Join me as we talk to leading experts on the latest developments in the region and what it means for the rest of the world. Welcome to our rapid response series, The Iran Conflict Brief, a special edition of the Columbia Energy Exchange Podcast. I'm Daniel Sternoff, a senior fellow at the Center on Global Energy Policy.
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  Good afternoon. We are recording this podcast on April 1 at noon in Washington DC, 8:30 PM in Tehran and 8:00 and 7:00 PM, respectively, in Abu Dhabi and Riyadh. This is day 33 of the war in Iran and the conflict is at a strategic inflection point. Officials in Washington have begun framing the case for victory. Iran's conventional armed forces in its military industrial complex have been decimated and its nuclear program, according to President Trump, has been set back 15 to 20 years.
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  Trump has mused that he could end the war without reopening the Strait of Hormuz and that the killings of Iran's top leaders is a form of regime change. Financial markets believe the president is looking for an off-ramp and that the war may wind down in the next two to three weeks. Yet at the same time, the USS George Bush and its carrier strike group are heading to the Middle East where it will meet reinforcements from two Marine expeditionary units and airmen of the 82nd airborne. Trump has clear options to escalate, including ground missions to help open Hormuz or to retrieve Iran's stockpiles of highly enriched uranium. Iranian outbound drone and rocket fire has dipped, but in Tehran's eyes, its war of attrition is succeeding. If the war ended today, Iran would hold the strategic upper hand over world energy flows. The strait of Hormuz remains mostly shut and while energy prices are being held in check by hopes that the war will end soon, physical markets are growing tighter by the day.
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  Shortages and rationing are spreading in Asia and the supply shock is moving toward Europe. Middle Eastern crudes are trading $10 to $20 a barrel over dated Brent and physical North Sea barrels are starting to be bid up to keep oil local instead of flowing east. Time is Iran's friend and a growing threat to the world economy.
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  I'm joined today by Robin Mills, a Dubai based non-resident fellow at the Center on Global Energy Policy and the CEO of Qamar Energy, which he established in 2015 to meet the need for regionally-based Middle East insight and project delivery across the oil and gas, renewable, hydrogen, and carbon management sectors. Robin has led major consulting assignments for the EU and Iraq and has worked in the region for Shell, the Emirates National Oil Company, and Dubai Holding, concentrating on business development in the UAE, Qatar, Iraq, and Iran.
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  He is the author of two books, The Myth of the Oil Crisis and Capturing Carbon and is the energy and environment colonist for Abu Dhabi's The National newspaper. Robin joins us on the ground in Dubai and has been living and breathing this crisis. I can think of no one better to speak about the war and the impact it is having in the Gulf States. Good evening, Robin.
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  Robin Mills (03:02):
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  Good evening.
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  Daniel Sternoff (03:03):
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  So first of all, Robin, how are you? The UAE has borne more drone and missile strikes than any country in this conflict, including Israel. How have you personally been experiencing this war? And are there any signs that you can see that the frequency and intensity of Iranian attacks on the UAE is diminishing?
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  Robin Mills (03:23):
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  Well, I would say, firstly, daily life is fortunately fairly normal. We get alerts, of course. Missiles, drones come in, we hear explosions and so on. And perhaps once a day, perhaps twice a day, probably not more than that where we are. But in terms of physical damage around the city, there's very little to see. We're sensible. We stay indoors when there's alerts, but otherwise, as I say, daily life is fairly normal. Of course, the city is fairly quiet. The tourists have gone. Schools are teaching virtually, so there's some adaptation to the threat. But otherwise, we're trying to carry on normal business and normal life as far as possible.
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  Daniel Sternoff (04:10):
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  Right. Well, hoping that you're staying safe. So let's turn to the situation in the Strait of Hormuz. We're a little bit hobbled during our conversation because President Trump will be giving a primetime address to the American people at 9:00 PM Eastern tonight. And he could declare victory and say we're wrapping up. He could be escalating. He could be stalling for more time. So we don't know exactly where he's going to be deciding, but I think at the current point in the war, we're at a place where a US-led military operation to reopen the strait would clearly be risky and time-consuming, and it might not still fully restore maritime traffic. But a negotiated reopening would require concessions to Iran, implicitly or explicitly recognizing its authority over 20% of world oil and gas flows. Which of those is the lesser evil for the Gulf States?
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  Robin Mills (05:10):
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  It's not a comfortable picture, is it? I mean, look, some kind of operation to restore regular transit through the Gulf would be the ideal, but I think nobody can describe what that looks like. What is that actually that would allow ships to pass through normally and would feel safe enough that they can sail, that they can put their vessels and their mariners into the strait without being worried about ships sinking and people being killed and oil spills and all the other bad consequences of that. And so far, almost no ships have been prepared to take that risk, apart from ships that have reached some agreement, some negotiation with the Iranians to pass through. Sometimes I think those are like political deals and allowing ships linked to India or Pakistan or Thailand to go through. Sometimes obviously it's Iran's own vessels. Sometimes these vessels are paying a toll and you'll hear the number of $2 million per ship thrown around.
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  (06:05):
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  But other than that, I think almost no vessels have been willing to try to sell through the strait. And there have been, actually, a couple of attacks over the past two days. One tanker off Dubai, Kuwaiti tanker, and one ship of Qatar, both damaged in the past two days. So I see that as a very much an Iranian signal that don't even try and go through the strait without getting our clearance, regardless of what Donald Trump will say. But yes, and that alcohol question of restoring transit, I suppose the less evil from the point of view of the world economy and even for the Gulf States would be transit under some kind of Iranian approval. That is still highly undesirable. Look, I think the amount of money itself, let's say it's $2 million per ship, that amounts for a typical very large crude carrier to about $1 per barrel.
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  So it's not very material in terms of costs, but the issue is that one of principle that Iran would then have control over the strait, which until now had been an international waterway and ships had sailed through. And I think worth mentioning the usual sailing routes, the usual passages through the strait go through Omani waters, not through Iranian waters at all. So you'd expect the Omanis to be consulted about this too, but I don't think anyone is going to be paying them tolls. But at least at least again, those ships moving again would be something, but I think that might be a stop gap for a few months, but it's clearly an unstable situation that at some point the Gulf States and the US and others will try to revisit.
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  Daniel Sternoff (07:35):
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  So it also sounds like if Trump were to just declare victory, having met major objectives of degrading Iran's capacity to project conventional force beyond its borders, and walk away, [that] would really leave the Gulf States in a very vulnerable position. How would they be approaching Iran in that scenario?
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  Robin Mills (07:56):
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  Well, I don't think there's any kind of clear picture on how to go about it. In that case, we'll have to see exactly what Donald Trump will announce. Indeed, is it just walking away? Is it some kind of a negotiated deal with Iran that leaves Iran an effective control? Is it an attempt at a military operation, an escalation which can then be sold as a success and then lead to a deescalation? But anyway, whatever it is, look, I think the Gulf States will have different views on this. You have the more, I wouldn't say hawkish because I think nobody really wants to join further military action here, but you have the more resolute messages I'd say from Saudi Arabia and the UE and perhaps somewhat a more [unclear] line from Qatar or Oman, which Oman is not so affected by this anyway. So there's a bit of a division of opinion on this.
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  (08:49):
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  But I think one key issue here is the matter of principle. A matter of principle over the waterway anyway is one thing. But then the political power that Iran gains from this, that they get into position of being able to negotiate and say, let's say to India or to Japan or to Thailand or whoever, you want your vessels to pass? Well, we have to have a discussion about that and see what you're willing to give. And this would completely break any attempt. I think the US is continuing its sanctions regime on Iran that it's had in place, of course, for many years, not just under Donald Trump, but under Barack Obama and in various forms right back to Jimmy Carter.
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  Daniel Sternoff (09:27):
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  All of which sounds very complicated, especially given the reality, we've had probably around 10 million barrels per day worth of upstream oil shut-ins across the Gulf because there's no logistical capacity to move that oil out. And it seems really hard to reopen any of that until the logistical chains open up to move boats in and out and in and out. And this kind of situation of a fragile ceasefire or left to the whims of Iranian control wouldn't give a lot of certainty. Do you agree with that? It seems like the oil market seems to think this will last a few more weeks and then we start going back to normal and we're just back to the status quo anti. Is that naive?
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  Robin Mills (10:13):
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  Yeah, I think it's very naive. Look, I think firstly, the ships that are passing the Gulf are primarily the few that managed to do so, they're primarily going out, right? There are ships that were stuck in the Gulf and that it negotiates some deal to get out. I can see if you're a ship owner and your ship has been stuck in the Gulf for four weeks and maybe it's got a cargo that's time sensitive anyway that has to be moved, but even if it isn't, you want your ship to get out. And if you have to pay the two million and you can find a way to do that, then so be it. Your guys are stuck there anyway. They're in danger that they want to get out as well, the guys who are sailing the ship. But that's very different from saying that you're going to voluntarily sail your ship into the Gulf, pick up some cargo and come out again.
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  (10:53):
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  And of that, we're seeing very little except as it relates to serving Iran's own trade. So that's I think the first part of this challenge is actually getting those ships moving in and out freely. But then the idea [that] it all goes back to normal. Well, look, I think the Iranian worry is here. Look, there was a war in June 2025, the so- called 12-day war. Iran suffered significant damage then. Then there was a ceasefire. And it was obvious to everybody, I think, that the US and Israel were going to come back and try to finish the job. And that ceasefire was not the end of it. And indeed, of course, they've come back. And the Iranians, I think, don't want to be fooled again if they were even fooled once. They want a much more durable commitment that will ensure that they're not going to be attacked again.
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  So they have to have some deterrence and the ability to close the strait is clearly deterrence, but I think there's also the forced example. I think it'd be important for the Iranians to show, look, they want to make this episode so uncomfortable and so unpleasant for everybody, their Gulf neighbors, the US, Israel, pretty much everybody else in the world, that no US president, Donald Trump or anyone else, ever dare try to do something like this again. So I think that they'll want to severely restrict traffic through the strait for a longer period, let the damage, let the loss of oil suppliers and gas suppliers and everything else pile up, let prices go very high, cause Donald Trump political damage, and hopefully from their point of view, damage him in the midterm elections, and then do some deal where things return to normal over a longer period.
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  Daniel Sternoff (12:26):
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  Right. So you're describing, I guess, the situation where Iran has escalation dominance and the threat that it is holding over energy supplies from the Gulf States and the world economy are intended somehow to protect it in the future and have a more durable ceasefire. I mean, I think viewed from a US or certainly an Israeli perspective, not very happy to see Iran with that kind of escalation dominance and voices in Israel basically saying, "Well, this is unacceptable to end this campaign and leave in IRGC led Iran with that kind of control." So maybe it's better now to start not just hitting some of their military and strategic targets, but to go after economic targets. We've seen the Israelis hit steel making capacity, oil depots, domestic gas production, and of course we've seen retaliatory attacks from Iran. The Israelis do seem tempted to target Iranian electricity infrastructure on the theory that maybe if they stay in charge, it's better they have an economic crisis that could create conditions to topple them.
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  (13:35):
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  That would obviously bring enormous risk to the Gulf states. So we're not out of the woods and these scenarios are possible. So maybe talk to me about GCC vulnerabilities in the event that this conflict still escalates or becomes more protracted.
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  Robin Mills (13:54):
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  Well, you framed the Iranian response against the GC's retaliation. I hesitate you to use that framing. It's a response, but not a retaliation, I think, because it's not the GCC states that are attacking Iran's energy facilities and its industries and so on. It's the US and Israel. So I think the GCC at least strongly kind of dispute this as a retaliation. There are neutral parties which are unfortunately become a target in this war. But that apart, yes, look, Iran is obviously attacking Israel quite actively with drones and missiles and certainly causing a fair amount of damage there, but Israel is a long way away with a fair amount of civil defense. The GCC countries are much closer and they're of course much, in that sense, easier targets. They have pretty good air defenses. They've been doing a good job on the whole, but obviously some missiles and drones do get through.
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  And they have an extremely systemically important energy industry, obviously, and a very important industrial industry, which is serving the industrial sector, which is serving the world economy. And that's been pretty well addressed over the past few weeks, just what else the Gulf supplies, fertilizers, chemicals, aluminum, sulfur, helium, all kinds of crucial commodities that people didn't pay much attention to until now. So those are all vulnerable. We've seen, I think, Iranian attempts fairly limited so far, but Iranian attempts to target power and water. So desalination facilities in Kuwait, for example, we've seen attacks on the oil refining sector pretty extensively throughout the Gulf attacks on gas facilities, attacks on the aluminium industry in Bahrain and the UAE, which is I think clearly a response to the Israeli attacks against the Mobarakeh steel plant in Isfahan and the Khuzestan plant in Southwestern Iran are two important steel facilities.
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  (15:49):
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  So it's kind of tit for tat, and I think the Iranians calibrate that response so that there's a twisted logic to it. They hit something of an equivalent sector.
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  Daniel Sternoff (16:01):
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  If the US or Israel were to target the electricity sector in Iran as has been threatened, what do you think that equivalent response would be?
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  Robin Mills (16:11):
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  Well, the obvious one, again, would be electricity. I think as far as we saw the blackout in Tehran recently was caused by some attack on power lines rather than a power plant, but yes, and I question if the Iranians would have the kind of precision to do that in response, but they have already attacked a major power and water facility in Kuwait a couple of days ago. Of course, some damage apparently is still operational, but those plants are crucial. And as we know, depending where you look, anywhere from 60-90% of the Gulf countries, drinking water is coming from desalination and those facilities are by the coast. There's a few of them, they're large, they're vulnerable to direct attack, but also things like oil spills that would affect the intake of water. So those are kind of an obvious target.
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  Daniel Sternoff (17:00):
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  Yeah. I mean, obviously this is a huge shock to countries and economies that have been focusing on economic growth and diversification and attracting inbound investments. I mean, particularly Saudi, UAE, and Qatar. If we have a fragile ceasefire and the IRGC is angry and still in control, how threatened is the economic model that Gulf States have been pursuing? Will this set back oil and gas development plans? Will it dent international investment for a substantial period of time? Will we embed some kind of new risk premium? What do you think?
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  Robin Mills (17:44):
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  I think it depends very much on the nature of the post-war or let's say post-intense conflict scenario. Look, the GCC states have been living next to Iran and the Islamic Republic now for almost 50 years, and it's always been an uncomfortable neighbor, not to the level of hostility now, but of course there was the tanker war in the 1980s when dozens of tankers were badly damaged in the Gulf. They lived next to Saddam Hussein, of course, all through that period and subsequently, and obviously Saddam himself, invading Kuwait, there are other regional states – Syria, Yemen, Libya – that have been through civil wars and serious disturbance. So that's something I think that the Gulf can manage if it's a level of background instability or an uncomfortable neighbor. I think the oil and gas projects, if the conflict has died down, the oil and gas projects themselves, these are major projects, critical national priorities. These are things that will go ahead.
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  The threat is more to the Gulf country's diversification initiatives, all they've been trying to do to grow a modern economy to attract investment, to become centers of tourism and international business and finance investment. Obviously in recent, the past couple of years. AI coming up as a major sector. So all of those things are harder to do and they will have to look hard at their models if they're in a somewhat insecure neighborhood where let's say normal life goes on and the insecurity is more in the back of people's mind, what can they do to compensate for that? They've become far more business friendly in the past few years anyway, particularly Saudi Arabia as it's been trying to catch up to the UAE. The UAE has also been making its own moves to become more business friendly and indeed both have made a lot of progress.
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  (19:37):
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  So I think there's more they can do on that front. So look, it really depends. If we're in a scenario with missiles and drones flying all the time and ships not sailing, of course, it's kind of hard to do that economic diversification and the normal economy. If that slips into the background and it's always a bit of a worry, but basically normal life and flights and travel and so on all resumes, then I think the Gulf States offering is strong enough that they can still come back.
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  Daniel Sternoff (20:05):
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  What about thinking about the value of US security guarantees and defense relationship? Obviously, the US is there and is defending the Gulf States, and yet it is also the case that the US initiated a conflict that is causing severe blowback. Do you see any questions around that relationship?
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  Robin Mills (20:27):
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  There are big questions, but look, no good answers. Yes, look, the US initiated this conflict. You can argue about the necessity and the urgency of it, but clearly the US along with Israel started it. And I mean, starting it is one thing, but I think doing so with apparently so little preparation, no consultation with allies, no attempt to plan for the very obvious consequences that Hormuz would be under threat, that energy facilities and other facilities would come under attack. We hear a lot about the inadequate inventories of interceptors, anti-drone measures and so on. The Ukrainians have turned up here to bring their expertise. That's highly welcome, but a month ago, the Ukrainians were being dismissed by the US as useless. Now they're absolutely being very gratefully received here. So that kind of lack of preparation I think is worrying. I think the US has shown its offensive capabilities, of course, are enormous and very effective and nobody doubts that, but the ability to protect its allies is certainly lacking.
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  So that's one big concern. But I think, as I say, more questions than answers, because it's not really obvious what the alternative is. The Europeans are not really a factor in this and they're probably wisely so far trying to stay out. China, which people saw as the big diplomatic hope, China brokered a Saudi Iran normalization back in 2019 that was meant to forestall exactly this kind of problem. And the idea was, okay, that Iran would be restrained from attacking Saudi Arabia because the Chinese were the main bar of its oil and would have some leverage. And the Chinese leverage is, I think, in a kind of existential crisis for the Iranian regime, that leverage is very little and that the Chinese haven't attempted to use it anyway. So China has just restricted itself to these kind of boilerplate expressions of concern and very generic five point plans and so on, which are not really very helpful.
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  (22:24):
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  So if the big security provider isn't the US and isn't Europe and isn't China, who is it? Is it an attempt to develop more indigenous capabilities? Is it an attempt by the GCC to work together more closely? Maybe some regional allies, maybe they try and lean more on Egypt or Turkey or Pakistan. None of these are particularly kind of comfortable formulations and they don't seem to offer anything close to a complete answer either, but look, there'll clearly be some efforts on a stronger regional security architecture and along with individual technical solutions. Of course, each country will try and buy better air defenses and secure more advanced technologies and protect itself and harden facilities and create redundancy and so on. And actually they've done a lot of that even since COVID for different reasons, but some of that resilience is showing its value today.
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  Daniel Sternoff (23:15):
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  Let me steer back to oil and gas. If this conflict has weeks but not months left and we somehow emerge from this without significant additional damage to core upstream or logistical facilities, how long will it take to restore pre-war production and flows? And is it possible that if we end up settling at a higher price deck for both oil and gas than we had previously, that from a revenue or a macro perspective, this kind of ends up okay or even beneficial to the Gulf States?
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  Robin Mills (24:02):
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  So I think at the period of recovery, let's say all the fighting stops and ships can sail freely again and so on. The period of recovery we're looking at, probably in the three to four month range, I think most Saudi and UA oil production would come back very quickly within days or weeks. Qatar, Kuwait, Iraq will take longer and that kind of gets into that three to four month timeframe. Of course, look, tankers are in the wrong place, storage is full, all the logistics are messed up, right? So that takes a bit of a while to recover. There's obviously been damage to the refineries, physical damage of various refineries. A bit hard to assess that right now. It didn't seem to be catastrophic as far as we can tell. I imagine stuff that is fixed up in a matter of months. The really serious damage was to the Qatar, two of the trains, of the units of its LNG facility been pretty clearly reported.
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  (24:56):
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  I think that was 17% of the total of output of the plant and with a repair timeline of between three to five years. I'd probably err on the lower end, I think probably three years to fix that. A lot of the expansion plans, particularly the Qatari LNG expansion plan has been held up, of course, nothing's going on that, of course, we can imagine perhaps a one year delay on that and then a bit of a question of priorities, do they fix the damage things or do they build the new things or try to do both? So yes, that kind of LNG glut that everybody expected at the start of this year is gone for now, but still I think if there's a reasonably near end of the war, Qatar comes back, the US and so on, or others are building up their LNG businesses. I think we could be back in the situation of pretty strong LNG supply and a comfortable market within 2028, 29, let's say.
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  (25:49):
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  And the oil cycle back to normal, I think because the OPEC plus group will relax its output restrictions. I think that's pretty clear. And if there's no serious damage to the fields, some countries can then produce at their full capacity for months until the situation normalizes. So yeah, we could see, this is a bit of a rosy case, but yes, we could see prices getting back to normal towards the end of the year. And then obviously a question, how much damage has been done on the demand side, how much demand destruction? So far, probably not much, to be honest. It's only been a month. There's only so much that countries can do with and rationing and so on, we'll all get relaxed quickly. The demand destruction I think would play out if we have a longer period of price spikes and then things start coming in like efficiency measures, like more renewables, more electric vehicles, all these kind of things that countries would take several months to years to put into place, like all the measures we saw in Europe after the Russian invasion of Ukraine to save gas, which took a time, but which have been overall very successful.
• 1:13
  Daniel Sternoff (26:53):
• 1:14
  Wonderful. Thank you, Robin. Let me wrap with your thoughts on if the Gulf States, obviously differences among them could script the most optimistic ending to the war right now, what would that look like?
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  Robin Mills (27:13):
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  Well, the most optimistic would be, but I don't think it's very likely, would be a significant change in the regime in Tehran. I don't just mean a shuffling of faces and more hardliners turning up, but I mean a change to a more constructive regime leadership that emerges and actually wants to rebuild and improve relations with its neighbors and with the rest of the world. Whether that was something completely different from the so- called Islamic Republic or whether that's at least a breakout of more pragmatism, that'd be the ideal outcome. I don't think that seems at all likely. I think if anything, there's been a shift the other way to more hardline group. But let's say that that's off the table, then I think the fallback on that is in Iran that kind of retreats within its borders, tries to rebuild, repair itself, and still has the threat over the Gulf and the straighter humus, but isn't actively using it and where normal transit returns and more or less normal business returns, but always with the thought at the back of people's minds that this could happen again.
• 1:17
  Daniel Sternoff (28:20):
• 1:18
  I think we're all talking about how we will go back to normal. And I suspect that we will not be approaching anything that we have been considering normal for quite some time. We'll be in something different or a new normal, but I am grateful that we have you as a colleague in the region. And Robin, thank you very much for your insights today. This is, as always, very helpful. And hoping that you stay safe.
• 1:19
  Robin Mills (28:49):
• 1:20
  Thank you. A pleasure to be here.
• 1:21
  Daniel Sternoff (28:52):
• 1:22
  That's it for this episode of Iran Conflict Brief, a limited series from the Columbia Energy Exchange Podcast. Thank you again, Robin Mills, and thank you for listening. The show is brought to you by the Center on Global Energy Policy at the Columbia University School of International and Public Affairs. I'm Daniel Sternoff. This podcast was produced by Mary Catherine O'Connor, Caroline Pitman, and Kyu Lee. Greg Vilfranc engineered it. For more information about the show or the Center on Global Energy Policy, visit us online at energypolicy.columbia.edu or follow us on social media @ColumbiaUnergy. If you like this episode, leave us a rating on Apple, Spotify, or wherever you get your podcasts. You can also share it with a friend or colleague to help us reach more listeners. If you have any questions, comments or feedback, we'd love to hear from you. Email us at columbiaenergyxchange@gmail.com. Thanks for listening.